grow. Treasury functions, spurred on by
rising interest rates, continue to transition from a post-crisis defensive crouch
to an aggressive focus on maximizing
both liquidity and yield.

Executing these two objectives will
require an optimistic mindset given the
combination of challenges impeding cash
management activities. The survey results show that treasury leaders plan to
work through uncertainty by re-ordering
cash management priorities, consolidating the number of banks they use for
cash management, and working with
their banking partners to optimize new
treasury technologies.

Regulatory and TechnologicalChallenges

It is important to consider this year’s
survey results in light of several significant forces. From a regulatory standpoint,
Basel III requirements continue to drive
revisions to multinationals’ liquidity
strategies. On the macroeconomic front,
Brexit is causing many treasury functions
to reconsider where they issue European
payments and to rethink cash pooling
structures. The U.S. Federal Reserve’s
draining of liquidity from the financial
system is elevating short-term interest
rates and reversing quantitative easing,
which is nudging longer-term rates higher
as well. This trajectory suggests that there
will be less cash in the banking system in
the near future, which should challenge
survey respondents’ rosy expectations regarding their own cash reserves.

Widespread technology advancements
and related digital transformation initiatives promise attractive long-term benefits—including faster global payments
and new payment models—but also give
rise to shorter-term disruptions and risks.
Artificial intelligence, robotic process automation, blockchain applications, and other
advanced technologies enable “
treasurers in multinational corporations to work
more efficiently while also gaining a better view into where cash around the world
sits and the possibilities for it,” Ruiz-Singh
points out. Yet treasury’s growing use of
data and data-sharing gives rise to new
cybersecurity and fraud risks, as well as
compliance concerns. The “vulnerabilities
presented by changing payments methods,
more aggressive cyber risks, and managing through evolving and rapid technological changes challenge corporate treasuries
to rethink their role in cash governance,”
Ruiz-Singh adds.

Looking Back: Tax ReformRaises Reserves

U.S. tax reform has affected corporatetreasury’s activities while increasing theneed for close collaboration with the taxfunction. Survey respondents identifiedU.S. tax law changes as the factor hav-ing the second largest impact on cashreserves behind increases in operatingcash flows.

The TCJA forced corporate treasurers, CFOs, and chief tax executives to
evaluate how much cash to repatriate to
the U.S. and how to reorganize different
legal entities to optimize tax exposure
and cash reserves. Treasurers and their
executive colleagues also have been
busy deciding where to invest tax-cut
savings. A recent Korn Ferry International survey indicates that increasing
capital investments and cash reserves
are the two highest priorities. “Changes
in tax code can impact cash management, as organizations rethink their
internal banking structures, decide
whether or not to pay down debt, and
work to get their treasury and tax professionals working more closely together,”
Ruiz-Singh points out.